If you have credit issues, you’ll find it challenging to get approval for standard credit cards. Keeping in mind the current situation, running only on cash isn’t a feasible idea. Today, you can choose between prepaid and secured credit cards. You can use both these cards to make easy and secure payments.
Do you know if a prepaid or secured card is ideal for you? For this, it is essential to find out your probable credit card use and personal finance goals. A secured card is instrumental in enhancing your credit.
And a prepaid card won’t hurt your existing credit in any way. Today, the credit card providers offer smart alternatives. To know more about this, you can check out the Legacy credit card.
However, for both cards, you must have a capital deposit with the card issuer, only then can you use it for making payments. Both cards work similarly to the standard credit cards. Here are a few essential facts that you need to know.
Understanding a secured credit card
Applying for a secured credit card is similar to any other standard credit card. These cards get supported with a safety deposit. Most credit issuers often sanction this card for users who have a poor credit record. When the card gets approved, you need to make a security deposit that gets refunded later. This deposit acts as the credit limit. For instance, if you choose to have $500 as your safety deposit, you get that much amount for the card. Going forward, you can use the card to buy any commodity akin to credit cards.
Here you get the monthly statements and have to clear monthly payments. Failing to do so will make you accumulate increased interest charges. You have to pay late fees for making late payments. Furthermore, users who default their payments will make the issuers utilize the security deposit, and they have to pay the penalty for that.
Understanding a prepaid card
Simply put, a prepaid card is a debit card that doesn't get linked to any bank account. Similar to a secured card, here also users need to make a safety deposit before using the card. The application process for this card is different. Here users don't need to go through a credit check, and there's no fear for rejection.
It functions close to a debit card. The cash you load is the cash you get to use. And when you pay using a secured card, the money gets subtracted from the card balance. When you have exhausted the cash, you have to add in more funds before using it again. There are monthly payments and late fees applicable. However, users wouldn’t be generating a credit history with this card. It’s because the usage doesn’t get reported to credit bureaus.
Furthermore, prepaid cards don't analyze finance charges or annual fees. However, users need to stay aware of various other fees. And you use the card, the issuer might charge a minimal fee each time there's a purchase.
Other cards might analyze the users a monthly maintenance fee or activation fee. Both cards come with a set of benefits that can help people. Once you've assessed your capital strength, credit balance, lifestyle habits, and goals, you can choose what best caters to your purpose.
About the author:
Sujain Thomas is a freelance content writer and blogger who has written articles for several renowned blogs and websites about various uses of social media to engineer more business traffic on business websites.